Juggling kleptocrats: the Bush years continue

I had lunch with a friend, yesterday, and I came up with a pretty good metaphor to describe the current financial crisis while talking about it with her. It is the dish stacking metaphor. At the root of this crisis is a shortfall in the amount of money that the average household can afford to pay on a house. That’s real simple. Stacked on top of that is the larger shortfalls of nested securities that depended on those bottom mortgages. The shape of the financial system is, from the plate stacking perspective, all wrong. Instead of smaller amounts of money depending on the larger amount at the bottom, the plates above the bottom plate get larger and larger, until you reach the great world of the derivatives plate.

The government has so far been trying to fix the problem from the top. But when a stack of plates starts to wobble, you can’t fix the problem from the top. The more you add to the top, the more the instability increases.

Which takes us to the latest and greatest news from our criminal oligarchy. In a coup d’etat move not unlike the patriot act, the Bush administration, prime architects of the disaster, are now proposing a bail out plan for the wealthy that, in its scope and audaciousness, dwarfs the tax cuts of 2001-2002.

I commented on this over at the Economist’s View. I’ll quote myself. Sorry.
When people say it is a solvency problem, what they really mean is that the effect of amplifying income inequality over the past thirty years and using all the resources of the government to stamp out "wage inflation", ie the just distribution of productivity gains to the producers, is that households are not increasing their incomes as they did in the pre-70s days. But policy makers are pretending like they are. The bailout plan still pretends that the bottom 80 percent of the population will buy and sell houses at prices that are greater than they can afford. Are the politicians still that stupid? The government can buy a 300 thousand dollar house in Phoenix and hold it all it wants to, the number of buyers who can really afford a 300 thousand dollar house simply aren't enough to make up a healthy market. It is that simple. If the government spent its 700 billion dollars giving every household in America a 20,000 a year raise, well, then they could afford those houses. Otherwise, no.

The housing bubble, the easy credit bubble, and stagnant wages form the Bermuda triangle of this economy, into which a trillion dollars is going to disappear. The United States of Denial strikes again.

ps - read Joe Nocera's column in the NYT. So funny, it will make the blood come out of your mouth. Now, onto a scintillating critique of the reactionary elements in Batman 4. Onward the Revolution!